Table of Contents

Preface PART I: The Real Options Potential 1: Introduction 2: Uncertainty Creates Opportunities 3: Option Valuation: The Nobel Prize - Winning Breakthrough 4: From Wall Street to Main Street: Options on Real Assets 5: Disciplined Strategy 6: Quick Lessons Part II: The Real Options Solution Process 7: The Four-Step Solution Process 8: Calculating Option Values 9: Adjusting for Leakage in Value Part III: A Portfolio of Applications 10: Valuing a Start-up 11: Investing in a Start-up 12: Exploring for Oil 13: Developing a Drug 14: Investing in Infrastructure 15: Valuing Vacant Land 16: Buying Flexibility 17: Combining Real and Financial Flexibility 18: Investing to Preempt Competitors 19: Writing a License Part IV: Conclusion 20: Changing the Questions We Ask Appendix: A Quick Introduction to Discounted Cash Flow and the Estimation of Volatility Guide to Literature Notes References Index About the Authors

About the Author

Martha Amram is the president of Glaze Creek Partners, a consulting firm in Palo Alto, California. She frequently speaks to senior management groups and has substantial experience in the use of the real options approach for the development of business strategy. Nalin Kulatilaka is a professor of finance at Boston University's School of Management, where he teaches primarily at the Executive MBA level. He has published widely on real options, risk management, and international finance, and has addressed executive audiences throughout the world on these topics.

Reviews

"Real Options is an exciting, accessible introduction to one of the most useful innovations of modern finance. Filled with lively examples from various industries, the book reveals the strategic power of real options in business planning."--David G. Luenberger, Professor of Engineering-Economic Systems and Operations Research, Stanford University, and author of Investment Science "This new book by Martha Amram and Nalin Kulatilaka provides a much-needed treatment of real options theory aimed at the practitioner. It is comprehensive, highly readable, and replete with useful examples. Every corporate finance practitioner should have a copy of Real Options on hand. --Robert S. Pindyck, Mitsubishi Bank, Professor of Applied Economics, MIT Sloan School of Management, and coauthor of Investment Under Uncertainty "Uncertainty is the greatest risk a manager faces--and provides the greatest opportunity for creating value. This book offers a way of thinking that helps managers balance the risks with potential payoffs when making decisions in an uncertain world. The real options approach is a simple yet potent method that great leaders--military, political, and economic--use implicitly. Real Options is an excellent introduction to these concepts and their applications."--James Wall, Treasurer and Controller, AirTouch Communications "Real Options is an exciting, accessible introduction to one of the most useful innovations of modern finance. Filled with lively examples from various industries, the book reveals the strategic power of real options in business planning."--David G. Luenberger, Professor of Engineering-Economic Systems and Operations Research, Stanford University, and author of Investment Science "This new book by Martha Amram and Nalin Kulatilaka provides a much-needed treatment of real options theory aimed at the practitioner. It is comprehensive, highly readable, and replete with useful examples. Every corporate finance practitioner should have a copy of Real Options on hand. --Robert S. Pindyck, Mitsubishi Bank, Professor of Applied Economics, MIT Sloan School of Management, and coauthor of Investment Under Uncertainty "Uncertainty is the greatest risk a manager faces--and provides the greatest opportunity for creating value. This book offers a way of thinking that helps managers balance the risks with potential payoffs when making decisions in an uncertain world. The real options approach is a simple yet potent method that great leaders--military, political, and economic--use implicitly. Real Options is an excellent introduction to these concepts and their applications."--James Wall, Treasurer and Controller, AirTouch Communications